Resolution of the Board of the National Bank of the Kyrgyz Republic No. 31/2 of June 10, 2015 on Amendments to Certain Resolutions

NATIONAL BANK OF THE KYRGYZ REPUBLIC

RESOLUTION

of June 10, 2015 No. 31/2

On Amendments and Additions to Certain Resolutions of the Board of the National Bank of the Kyrgyz Republic

In accordance with Articles 7 and 43 of the Law of the Kyrgyz Republic "On the National Bank of the Kyrgyz Republic", the Board of the National Bank of the Kyrgyz Republic

RESOLVES:

1. Make amendments and additions to the following resolutions of the Board of the National Bank of the Kyrgyz Republic (attached):

• "On Approval of the New Edition of the Regulation "On Asset Classification and Corresponding Provisions to the Reserve for Covering Potential Losses and Expenses" dated July 21, 2004 No. 18/3;

• "On Certain Regulatory Legal Acts of the National Bank of the Kyrgyz Republic" dated June 30, 2010 No. 52/4.

2. This Resolution applies to newly issued and restructured credits after the entry into force of this Resolution.

3. The Legal Department:

• publish this Resolution on the official website of the National Bank of the Kyrgyz Republic;

• after official publication, send this Resolution to the Ministry of Justice of the Kyrgyz Republic for inclusion in the State Register of Regulatory Legal Acts of the Kyrgyz Republic.

4. This Resolution enters into force upon the expiration of one month from the date of official publication.

5. The Supervision and Licensing Methodology Department shall bring this Resolution to the attention of commercial banks, the specialized financial-credit institution JSC "Financial Company of Credit Unions", and the State Development Bank of the Kyrgyz Republic.

6. Control over the implementation of this Resolution is entrusted to the Deputy Chairman of the National Bank of the Kyrgyz Republic L. Orozbaeva.

Acting Chairman	N. Zhenish

	Appendix to the Resolution of the Board of the National Bank of the Kyrgyz Republic dated June 10, 2015 No. 31/2

AMENDMENTS AND ADDITIONS to certain Resolutions of the Board of the National Bank of the Kyrgyz Republic

1. Make the following amendments and additions to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the New Edition of the Regulation "On Asset Classification and Corresponding Provisions to the Reserve for Covering Potential Losses and Expenses" dated July 21, 2004 No. 18/3:

in the Regulation "On Asset Classification and Corresponding Provisions to the Reserve for Covering Potential Losses and Expenses", approved by the aforementioned Resolution:

• supplement Chapter 2 after item 2.3-1 with item 2.3-2 of the following content:

"2.3-2. Contract financing is a credit product in the form of short-term financing (up to one year) of working capital for the fulfillment of the client's obligations under a contract with counterparties.";

• rephrase the second paragraph of sub-item 4.3.2 of item 4.3 as follows:

"- incomplete collateralization by an asset that otherwise has all the characteristics inherent in satisfactory assets, or collateral within the framework of contract financing (for example, the right to claim under the financed contract, guarantees, accounts receivable, etc.);";

• supplement sub-item 5.2.2 of item 5.2 with the sixth paragraph of the following content:

"- deterioration of the financial condition of the guarantor/guarantor and/or the client's counterparty who received a loan under contract financing.";

• rephrase the fifth paragraph of sub-item 5.3.2 of item 5.3 as follows:

"- inability, refusal of the client to repay the debt, or expression of intent to pay, but without actual repayment, and the absence of a secondary source for asset repayment, inability/refusal of the guarantor/guarantor and/or the client's counterparty who received a loan under contract financing to fulfill their obligations;".

2. Make the following additions to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Certain Regulatory Legal Acts of the National Bank of the Kyrgyz Republic" dated June 30, 2010 No. 52/4:

in the Regulation "On Minimum Requirements for Credit Risk Management in Commercial Banks and Other Financial-Credit Institutions Licensed by the National Bank of the Kyrgyz Republic", approved by the aforementioned Resolution:

• supplement item 4 with the second paragraph of the following content:

"Contract financing is a credit product in the form of short-term financing (up to one year) of working capital for the fulfillment of the client's obligations under a contract with counterparties.";

• in the fifth paragraph of item 3, replace the sign ";" with the sign "." and supplement with a sentence of the following content:

"In the event that the collateral for contract financing in the amount of more than 100,000 som is a guarantee and/or the right to claim under the contract, the bank must analyze the solvency of the guarantor/counterparty of the borrower for at least the last year, assess the risks associated with the performance of obligations by the parties to this loan and the realization of the secondary source of repayment in the event of non-repayment of the loan by the borrower.";

• supplement Chapter 4 with item 61-4 of the following content:

"61-4. When calculating the maximum risk size ratio for loans not secured by collateral, loans in the form of contract financing are excluded, which meet all of the following criteria:

• the outstanding balance of loans in the form of contract financing does not exceed 3% of the total volume of the bank's loan portfolio;

• the share of overdue loans issued in the form of contract financing in the total volume of the loan portfolio does not exceed 1% over the last 6 months, and in the total volume of these loans over the last 12 months does not exceed 2%;

• settlements between the borrower and his counterparties on contract financing are carried out only through the borrower's accounts in this bank;

• the borrower who received the loan, his guarantor/surety (if any), as well as the counterparty of this borrower, are not insiders or affiliated persons of the bank.".